Philly Fed Manufacturing Reports Surge

Regional Feds don't state their sample sizes for individual manufacturing reports but the big jump in July that follows a big slump in June suggests that respondent participation in the Philly Fed's recent samples may be on the thin side. The general business conditions index surged 21.5 points in July to a far higher-than-expected 21.8 in a gain mirrored by similar swings higher for new orders, now at 18.9, and employment now at a whopping 30.0. Shipments are at 24.9, delivery times are stalling at 15.0, and inventories are on the rise at 8.1 -- all signs of very strong demand. Price pressures are heating up for both inputs and finished goods. Of course the 6-month outlook follows suit, up more than 16 points to an upbeat 38.0.

The Empire State report, like this report, also swung lower then back higher in data posted on Monday. Yet the direction signaled last month by both of these reports stands in contrast to June's solid rise in manufacturing production, definitive data on the economy posted Tuesday. Swings in small sample reports, where monthly responses may total no more and maybe not even 100, may be saying more about their methodological limitations than the actual direction and pace of manufacturing activity.